The Early Years

Spring 2014

How to build a good financial foundation in your 20s


When I was in high school in the ’90s, we studied trigonometry for an entire year, but never once learned to balance a checkbook, create a budget, negotiate salary or invest for retirement. Guess which skill set proved more useful to my future? Unfortunately, it wasn’t trig.

Luckily for today’s young women, many high schools now require students to study personal finance, and there are many other resources available, including websites, blogs and budgeting apps.

Young women lay crucial financial groundwork when they’re just starting out. Of course, one can always regroup later in life—it’s never too late—but it’s a much easier, more lucrative path if you work to achieve financial stability from a young age. Just as it’s never too late, it’s never too early to start!

“Being a young woman, it can be hard to find time to keep track of your personal finances,” says Tiffany Polifka, financial advisor with Arnold Weitz & Co. “Creating a budget and setting goals, even short-term goals, can get you off on the right foot when starting your financial journey.”

Ask Questions and Get Educated

“The biggest mistake most young women may make is not asking questions when they don’t completely understand something,” Polifka says. “We tend to be intimidated when it comes to managing finances or retirement plans because we are not accustomed to dealing with them or simply don’t understand the terminology. It’s cliché but there really are no stupid questions when it comes to understanding your financial situation. If you can’t find a good advisor, a parent or older mentor can provide answers or advice.”

“Take some courses, invest in yourself, ask for help,” says Jennifer Davidson, director of programs and community development at the Nebraska Council for Economic Education (NCEE). “Understanding finances is a must. This is an area that overlaps and penetrates all other areas of your life. Having a sound foundation for taking care of your finances is crucial.”

The NCEE offers resources for the classroom and to help young women learn how to budget, understand compound interest and more. The NCEE partners with the Nebraska Financial Education Coalition (NFEC), which Davidson says “is a group of folks committed to increasing financial literacy in our great state. If someone is seeking assistance, there is someone at NFEC willing to help—just look at the directory.”

Beyond formal courses and resource organizations, it’s key to simply ask any time you don’t understand something related to your finances. Ask your bank or credit union, financial advisor, creditor, payroll department, or any company you do business with if anything is ever unclear.

Negotiate Your Salary

Karen Falconer Al-Hindi, Ph.D., professor of geography and women’s and gender studies, director of the UNO Women’s and Gender Studies Program, and facilitator of local Smart Start workshops, says successfully negotiating your first salary improves your income for life.

“The higher [your] first salary, the higher all subsequent salaries will be—including bonuses, etc.,” she says. “This will lead to a lifetime of higher wages.”

Start Smart is a joint project of the American Association of University Women (AAUW) and the WAGE Project. Marilyn Bombac, AAUW-Nebraska president, agrees with the urgency of negotiating salary from your career’s start.

“An individual’s first salary provides the foundation on which future raises are based, forms earnings expectations, and even impacts future retirement benefits,” she says.

Al-Hindi also notes that developing negotiation skills at a young age serves women in many areas of their lives.

“Negotiating also shows the hiring manager or supervisor that she possesses these skills, and thus that she brings even more value to the organization,” she adds.

Through the Smart Start program, Al-Hindi trains women to understand the gender wage gap and negotiate their salaries. She says the program’s goal is “to empower women financially through closing the gender wage gap, one salary negotiation at a time.”

While the Smart Start program is designed for women, men are also welcome to attend.

“The first step is to become well-informed about salaries and benefits in the positions that have been offered in comparable organizations,” she says.

Al-Hindi cautions against blindly accepting an employer’s initial offer and advises women to practice what they’ll say in negotiations—informed, of course, by their own financial requirements as well as the going rate for the position in question.

“Instead of accepting it, [a woman] should pause and then say something like, ‘I’m really excited about this job, and the opportunity to work for your organization. However, my research on salaries makes me think that the salary range for this position is more like…’ In other words, be well-informed, be enthusiastic and be confident—and polite,” she says.

“Value what you will bring to the company and be prepared to discuss those things during negotiations,” adds Davidson.

Aside from personal gain, negotiating your salary has important ripple effects.

“The woman who negotiates a higher salary for herself benefits the organization that hires her, her family and all American women,” says Al-Hindi.

Create a Budget and Financial Goals

The first step to financial security, of course, is to establish a budget. “Everyone should live on less than she earns,” Al-Hindi says. “She should add to her savings each month, because money in the bank equals freedom.”

She adds that creating a monthly budget and sticking to it is instrumental in knowing what your minimum compensation package is—which is crucial when negotiating salary or raises.

Cynthia Buettner, senior vice president of IT, marketing and sales for SAC Federal Credit Union, echoes the need for each young woman to “have a realistic budget that is based on her current income and living expenses.”

Budgeting is “one of the most important things you can do for yourself,” according to Polifka, who suggests using a website or app, such as, as a tool. Or, even a simple Excel spreadsheet.

“A budget will help you know exactly where your money is going and identify problem areas,” she says. “Knowing how much you have left after your fixed expenses will help you determine what you have to spend on food or nights on the town. Having a budget also allows you to find items you can cut out in order to save for your next vacation or house.”

Davidson advises women not to be afraid of budgeting. “It’s simply putting together a plan and a path to get where you want to go; it is not meant to be a straitjacket,” she says. “You wouldn’t go on a vacation without a plan. A plan for your finances is a must!”

“Goals can be as simple as setting aside a small amount of money for savings each month or as large as completely ridding yourself of debt. This can seem daunting at times. It may be easier to set a date and a goal and then work backwards through the steps and timeline needed to achieve it,” Polifka says.

Manage Your Credit Score

Your credit score can make or break opportunities when it comes to borrowing for a home or car, and should be fiercely protected.

“Understanding your credit score is a must,” says Davidson. “If you plan to borrow at any time, your credit score controls the interest rate you will get. A good score gets you a low interest rate and you will pay less to borrow funds. A low credit score gets you a higher interest rate and perhaps even declined for the loan. In addition, some jobs require a credit check as it is seen as a reflection of your character. It’s important to know what is on your report and catch and correct inconsistencies early.”

“Often young adults will gain access to credit cards and not do a good job of managing them. They will spend beyond their means and then end up in a tough situation,” says Buettner. “If they miss payments their credit score will suffer and it will take time to bring the score back up. While it is low, they will pay more for interest on loans and may even be denied credit. Staying on top of debt and maintaining great credit should be a focus for every young person just starting out. A credit card is a great tool to build credit when it is used responsibly.”

Student loans can also affect your credit score. Buettner says the first step here is to understand your loan.

“As a borrower you should know what interest rate you are paying, your loan term, and any penalties that may be associated with an early pay-off. Then shop around. Be sure to make your student loan payments on time each month as a bad payment track record will affect your credit score,” she says.

“Looking at your credit report should be a yearly ritual,” says Polifka. “Not only does pulling it up every year help to protect you from fraud, it allows you to correct any errors that may be pulling your credit score down. While this may seem unnecessary it will mean much more when you go to purchase a home or a new car. The best place to get your three credit reports is The website also has guides on what to look for and how to spot identity theft.”

It’s important to use every available resource, including credit reports, blogs and financial advisors when monitoring and maintaining your credit score. And, again, if you don’t understand something, be sure to ask.

SAC’s blog offers information on everything from credit score management to credit score repair,” says Buettner. “And of course you can always visit a branch and we will walk you through the basics of understanding your credit score.”

Save, Save, Save

“A huge mistake is to put off saving,” says Davidson. “If you start early and capitalize on compound interest you will be on solid financial footing in a short time rather than stuck living paycheck to paycheck. Savings is a habit to start as early as possible and you don’t have to make a lot of money to save. Being secure financially is about how you spend, not about how much you earn. You must always live within your means and include savings in your budget.”

“When you’re just starting your nest egg, trying to find $20 to put into savings is not an easy task. It takes determination and self-control,” says Polifka.

She suggests getting creative with discounts, rewards programs and coupons as a fun way to start saving, using sites like Groupon, Pinpoint and

“Using a discount and moving the money you save into your savings account is a great way to start building a nest egg,” she says. “It can save you thousands every year if you are diligent.”

Whether saving up for a nest egg, a goal or retirement, young women should be strategic and intentional about their savings plans.

“If at all possible, every young woman should invest in their 401(k) and/or savings plans offered through their employer,” says Buettner. “Ideally, they will invest the most they can and still live comfortably. I always advise people to just get started, even if it is $25 a pay period.”

Buettner also says to always take the highest match your employer offers.

“This is a great benefit and you don’t want to leave that money on the table,” she says.

“When you sit down with the pile of paperwork and thick booklets for your retirement savings it seems easier to just throw your hands up and walk away. It’s important to realize that this is part of your salary and just as important as what you will make each year,” says Polifka. “With 401(k)s or any other retirement plan you are going to want to max out any match the employer is offering. For companies who will match dollar for dollar up to a certain percent this provides you with an instant 100 perent return on your 401(k) contributions.”

Merging Finances

At some point in your early financial phase you may marry or cohabitate and decide to combine finances with a partner. With all of the careful groundwork you’ve laid, you should be very calculated about entering into joint finances.

Polifka advises women to be an active player when it comes to combining two financial households.

“It is critically important to sit down with your spouse, create a plan for your financial future together and set goals,” she says. “Having a good idea of where you both stand and how you want to handle your finances early on will help to avoid confrontation later. You will want to regularly re-evaluate your financial plans, especially during major life changes, as you will find your financial priorities will have changed.”

“Obviously you should have a conversation with your partner about his or her preferences and then make a plan,” echoes Buettner. “You may want to maintain your own accounts and then split the living expenses or you may choose to combine all the income into one or two accounts. Either way, setting a family financial strategy complete with savings goals is critical to achieving your life dreams. In terms of credit, be sure to be involved when you are being placed on a loan or credit card. Your credit can be positively or negatively impacted so you should be aware when you are listed as a responsible party. Always make the payments on time and be sure to remove your name or close the account once you are finished.”

The Bottom Line

“Young women need to plan for their futures in terms of building credit and saving,” says Buettner. “It’s very important to have a budget and a plan that reflects [your] current situation. Without a plan, a young woman may find herself wondering where her money went at the end of the month. Get a plan and stick to it!”


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